Argentine soy scorched beyond return, season 'dead': experts

BUENOS AIRES (Reuters) - Hope has withered for any recovery in Argentine soy yields hit by a four-month drought that shows no signs of abating, farmers and analysts said on Monday, prompting China to step in to fill the gap in soymeal exports from the world’s No. 1 supplier.

Soy plants are seen in a drought affected farm near Chivilcoy, Argentina, February 28, 2018. Picture taken February 28, 2018. REUTERS/Martin Acosta

The dryness that has blighted the Argentine Pampas since mid-November has forced producers to repeatedly slash their estimates for the 2017-2018 crop. The light rains that are forecast for the days ahead will not be enough to restore fields baked by an unrelenting southern hemisphere summer sun.

“The current season is dead in terms of crop yields,” said German Heinzenknecht, weather specialist with the Applied Climatology consultancy.

“The showers that are on the way are not going to help soy or corn, but they could improve planting conditions for wheat, which starts being sowed in May.”

China’s 2017/18 soymeal exports are set to nearly double to around 2 million tonnes, traders said on Monday, lifted by lower Argentine supply. Asian countries led by Japan, South Korea and Vietnam are key importers of soymeal.

Argentina is the world’s third-biggest exporter of soybeans and corn, as well as the top provider of soy-based livestock feed, used from Europe to Asia to fatten pigs and cattle.

Sparse showers of about 1 centimeter (0.4 inch) are forecast for Wednesday in the usually fertile Pampas grains belt, with 2 to 2.5 centimeters expected on Saturday, Heinzenknecht said.

“You can say, cautiously, that the weather will improve but not with the velocity needed to end the drought.”

Argentine soybean exports are taxed at 28.5 percent, so the fiscal impact of the drought could be hard as President Mauricio Macri prepares to seek re-election next year while trying to cut the budget deficit and fund infrastructure projects.

The disaster on the Pampas has exerted upward pressure on soybean and corn futures on the Chicago Board of Trade.

Farmers in the U.S. Midwest are scrambling to sell grain that has been held in storage for months to take advantage of prices rallying on Argentina’s woes.

Analysts have slashed their soy crop forecasts, which started the season in the range of 55 million tonnes, to below 45 million.

Corn plants are seen in a drought affected farm near Chivilcoy, Argentina, February 28, 2018. REUTERS/Martin Acosta

“GAME ALMOST OVER”

“It’s really awful around here. Yields are just falling and falling,” said Pedro Vigneau, who operates a 1,400-hectare farm in the central Buenos Aires district of Carlos Casares.

He now expects to harvest two tonnes of soybeans versus the 3.5 to 4 tonnes that he expected at the start of the 2017/18 crop year.

Vigneau has lowered his farm’s corn harvest forecast to about half of the eight to nine tonnes estimated at planting.

“It might rain on Wednesday but the game is almost over. The impact of the drought will be severe and the area affected is really wide. When you speak with farmers from different areas you realize their fields are almost all in bad condition,” Vigneau said.

Argentine is expected by the Buenos Aires Grains Exchange to harvest 42 million tonnes of soy and 34 million tonnes of corn in the 2017-18 season, down from prior estimates of 44 million and 37 million tonnes, respectively.

“The major area affected by the drought in the central and southern part of the farm belt has no chance of recovering yields, even if it were to start raining,” said Esteban Copati, chief analyst at the exchange.

When the exchange slashed its estimates last week it warned that dry, hot conditions in northern provinces could lead to further reductions.

Temperatures are cooling as the Argentine summer draws to a close, providing some help to parched crops, said Isaac Hankes, a weather research analyst at Thomson Reuters’ Lanworth commodities and weather forecaster. “The rainfall arrival is still about six days out in most regions,” he added.

That would do little to resuscitate the country’s gasping soy and corn fields, according to the Rosario grains exchange.

“Showers are expected in the second half of March, but that’s going to be too late for the most part,” said Emilce Terre, head of research at the exchange, located near the soymeal and soyoil plants that dot the banks of Parana River.

“At this point, it if rains a lot over the next month all it would do is complicate harvesting. It would be unlikely to help soy and corn yields,” Terre said.